A consumer consumes only two goods X and Y both priced at Rs. 3 per unit . If a cosumer chooses a combination of these two with Marginal Rate of Substitution equal to 3, is the consumer in equilibrium ? Give reasons . What will a rational consumer do in this situation ?

A consumer consumes only two goods X and Y both priced at Rs. 3 per un

1.	A consumer consumes only two goods X and Y both priced at Rs. 3 per unit . If a cosumer chooses a combination of these two with Marginal Rate of Substitution equal to 3, is the consumer in equilibrium ? Give reasons . What will a rational consumer do in this situation ?
Answer» Solution :GivenPx=3 , Py =3 and MRS =3 , A consumeris saidto be in equilibrium when : `MRS =(P_(x))/(P_(y))` Substituting values we find that:`3gt(3)/(3)` i.e`MRS gt(P_(x))/(P_(y))` Therefore consumer is not equilibrium. `MRS gt(P_(x))/(P_(y))`MEANS that consumer is willing to PAY more for ONE more unit of X as compared towhat MARKET demands. -Theconsumer will buy more units of X. - As a result MRSwill fall due to the Law of Diminishing Marginal UTILITY . -This will continue till MRS`=(P_x)/(P_(y))`andconsumer is in equilibrium.